Debt deal imminent? GOP says yes, Dems say no

WASHINGTON - The White House and congressional leaders made a desperate, last-minute attempt Saturday to reach a compromise on raising the nation's debt limit and averting a potentially catastrophic first-ever default on U.S. financial obligations.

President Barack Obama met with top congressional Democrats at the White House and spoke by phone with Senate Republican leader Mitch McConnell.

As a result of the ongoing negotiations, Senate Majority Leader Harry Reid, D-Nev., said he was postponing a new planned vote on raising the debt ceiling until Sunday afternoon at 1 p.m. EST to give the White House and congressional leaders more time to negotiate a compromise. How close the two sides are is in dispute.

Mitch McConnell said at a joint news conference with House Speaker John Boehner that he was confident a deal could be reached: "I'm confident and optimistic that we're going to get an agreement in the very near future and resolve this crisis in the best interests of the American people," he said.

But McConnell's upbeat assessment triggered a pointed rebuttal from Reid. "That's not true," he said after returning from a meeting at the White House with Obama and House Democratic leader Nancy Pelosi.

Obama is seeking legislation to raise the government's $14.3 trillion debt limit by enough to tide the Treasury over until after the 2012 elections. He has threatened to veto any legislation that would allow a recurrence of the current crisis next year but has agreed to Republican demands that deficits be cut — without tax increases — in exchange for additional U.S. borrowing authority.

Without a compromise in place by Tuesday, administration officials say the Treasury will run out of funds to pay all the nation's bills. The subsequent default could prove catastrophic for the U.S. economy by causing interest rates to rise and financial markets to sink, sending shockwaves around the world, they say. With financial markets closed for the weekend, lawmakers had a little breathing room, but not much. Asian markets begin opening for the new work week when it is late Sunday afternoon in the U.S. capital.

"There is very little time" Obama said Saturday in his weekly radio and Internet address. He called for an end to political gamesmanship, saying "the time for compromise on behalf of the American people is now."

Obama needs Congress to approve an increase in the government's borrowing authority, known as the debt ceiling. Past increases have been routine, but Republicans, citing the giant U.S. deficit, have demanded huge spending cuts as a condition for approving the increase.

After weeks of intense partisanship, there was renewed talk of compromise that contrasted sharply with earlier developments as both the House and Senate convened for unusual Saturday sessions.

McConnell and Boehner held their news conference shortly after the House of Representatives rejected a Senate Democratic bill drafted by Majority Leader Harry Reid to raise the government's debt limit by $2.4 trillion and cut spending by $2.2 trillion.

The House vote was 246-173, mostly along party lines and after debate filled with harsh, partisan remarks. The vote was unusual in that Republicans lined up to kill Reid's legislation even though it hadn't even cleared the Senate. It was orchestrated as political payback because late Friday Reid had engineered the demise of a House-passed bill hours after it passed.

Shortly after the House vote, Obama stepped back into the debt-ceiling talks, calling Democratic leaders Reid and Pelosi to the White House for a meeting.

Before the House vote, Republicans said the Reid spending-cuts plan was filled with gimmicks and would make unacceptable reductions in defense spending.

"It offers no real solutions to the out-of-control spending problems," said Rep. Alan Nunnelee of Mississippi, part of a group of 87 first-term Republicans who have led the push for deeper spending cuts.

Pelosi said Boehner "chose to go to the dark side" when he changed his own legislation to satisfy tea party-backed Republican lawmakers and other critics, prompting catcalls from the Republican side of the aisle.

Not even Democrats seemed to like Reid's measure very much, although many emerged from a closed-door meeting of the rank and file saying they would vote for it.

With their votes, many Democrats signaled their readiness for compromise by voting to cut spending without raising taxes. Many Republicans insist taxes must not be raised to cut into federal deficits, even for the wealthiest Americans and for big oil companies.

Across the Capitol, the Senate marked the hours before a scheduled test procedural vote at 1 a.m. Sunday (0500 GMT) on the Senate Democratic measure.

There was no doubt about the outcome there, either, unless compromise intervened. A total of 43 Republicans sent Reid a letter saying they would block the bill from advancing, enough to prevent it from coming to a final vote under Senate rules.

The outcome of the weekend endgame was anything but clear as Democrats and Republicans remain at odds over how to force lawmakers to come up with additional budget savings later this year beyond the almost $1 trillion in agency budget cuts over the coming decade that they basically agree on.

The latest House Republican measure, which squeaked through on a 218-210 vote on Friday, pairs an immediate $900 billion increase in U.S. borrowing authority along with $917 billion in spending cuts spread over the coming decade.